India's consumer inflation dipped to 6.71% in July, easing for the third month in a row, helped by a slower increase in food and fuel prices and adding to expectations that the central bank may rein in the pace of its policy rate hikes next month.

The year-on-year figure, published on Friday by the National Statistics Office, was marginally lower than the 6.78% forecast by economists in a Reuters poll. But it remained above the central bank's 2-6% tolerance band for a seventh month in a row.

After months of eye-watering inflation readings across much of the world, policymakers are wondering if they may have seen the peak of price pressures given recent evidence of moderation in Japan, China and the United States.

However, few are willing to make definitive calls with the Ukraine war and pandemic continuing to tie up supply lines.

"Inflationary pressures have eased," a government source said on Thursday, adding that the government and central bank would continue to take steps to bring retail inflation below 6%.

Economists said they expect the Reserve Bank of India (RBI) to raise policy rate by at least 25 basis points next month as real interest rates are still negative.

The RBI's Monetary Policy Committee has lifted the key repo rate by 140 basis points since May, including by 50 bps this month, while the government imposed restrictions on export of crops including wheat and sugar while cutting fuel taxes.

Food inflation, which accounts for nearly half the CPI basket, was 6.75% in July, also easing for the third month in a row. Prices of edible oil and some metals fell.

Core inflation, excluding volatile food and energy prices, was estimated at 5.79-5.80% in July, lower than 5.96- 6.2% estimates in June, said two economists, after the data release.

India does not release core inflation data.